Short excerpt from a trading-focused YouTube video arguing that evaluating trades by raw profit (e.g., dollars gained) can be misleading if the risk (R multiple) is excessive. The speaker warns that risking large amounts relative to possible reward makes long-term profitability unlikely, even if some trades show green (positive) outcomes.
I made 0.29 R, right? So I risked $562, but I made $162. So this trade looks great. It's like, wow, he made $162. And I'm like, yeah, that's a green trade that someone made. Check off and say, well, this is a great trade. But when I go into the logistics of the trade based on where my stop was, based on if this trade went through, I would have been wrong. I was risking $500 to make 162,000 guys. Think about it long term wise. That is not because how many times do I have to be right to be able to continuously be profitable? So having an R multiple that doesn't make sense or is way off is just not going to allow you to be profitable. Even if you have some trades that are profitable. Right.
